Expatriate Tax Advice if You’re Emigrating to Australia

With home repossessions rising in the UK, inflation still too high and the risk of job losses becoming an ever grater reality, increased numbers of Britons concerned about the state of the British economy are looking further afield for a suitable destination in which they can live a more comfortable and happier life.

With findings from many expat surveys showing that even if expats are still affected by the global effects of the financial crisis, they are still generally happier, wealthier and healthier abroad, it really is unsurprising that so many of us are serious about wanting to emigrate.

Australia remains one of the top choices for Brits thinking about moving abroad, and in this article we cover the basics of expatriate tax advice for you if you’re emigrating to Australia.  After all, you don’t want to end up paying tax twice – once in the UK and once down under – do you?!

The Australian tax year runs, rather confusingly, from the 1st of July to the 30th of June – whereas in the UK, it runs from April the 6th to April the 5th.  Therefore this immediately creates a situation where tax liabilities can become confused and even double up once you move abroad.  The thing to remember is that your main tax liability comes from the nation in which you are deemed to be resident.

So, as soon as you know you’re leaving the UK for a new life down under, it is essential to de-register your taxable presence in Britain.  To do so you go to the HMRC website and download, fill in and send back their P85 form.  This basically tells the Revenue when you’re leaving the UK so that they can calculate any tax liabilities from there on in.  Theoretically you can still be classed as tax resident in the UK even though you have moved to Australia, started work perhaps, and are classed upon arrival as tax resident in Australia.  But that’s why nations have double taxation agreements in place, and it’s also why you get credits for any tax paid in the UK to offset against any Australian liability.

For most people this transitional period of confusion lasts for a maximum of a year whilst the UK gets used to the idea that you have moved, and they eventually give up their income tax claim on you!  Your best bet is to keep records of every single amount you have paid to either tax authority in the pervious tax year, and to find a qualified accountant in Australia who will help you with your first tax return.

If you’re employed, you may very well be taxed at source.  When it comes time to complete your tax return you will be able to prove all that you have paid as you have earned, that which you paid in the UK before you moved and subsequently, and credits will be given for all that has been paid.  Chances are you will be able to reclaim some tax from the UK and/or Australia.  But your accountant will help you with this.

Certain expenses are deductible from your tax liability such as any business expenses for employees if you’re self-employed for example, and other deductible expenses include the purchase of technical journals, professional association memberships and subscription fees and car and travel expenses – although please note, your commute travel expenses if you’re an employee are not deductible.  A certain amount of medical costs and also health insurance premiums can be deducible, there is tax relief on pension contributions, and the system works in a similar way to the British one.

Remember that ultimately you are seldom liable for tax in two countries at once on the same income earned or asset disposed of, and that any tax you do have to pay in advance can be used as a credit to offset liability in the other nation.  And finally, a good accountant is an essential support person for any expat during at least their first year of living abroad – whether you’re living in Australia, the UK, Dubai or America as an expat!